Interim Report January - March 2001

Tue, Apr 24, 2001 13:19 CET

Interim Report January - March 2001
· Sales increased 28 percent to 3,069 MSEK (2,394)
· Operating income increased 18 percent to 491 MSEK (415)
· Profit before tax was 445 MSEK (400)
· EPS increased to 0.80 (0.59), an increase of 36 percent
· EBITDA increased to 647 MSEK (536)
· Total shares outstanding as of March 31, 2001 amounted to 362.9
million compared with 375.1 million as of December, 2000
Swedish Match sales increased by 28 percent, of which acquisitions
accounted for 15 percentage points, in the first quarter versus the same
period last year. The higher dollar rate has effected sales with 4
percentage points. Organic sales growth amounted to 9 percent. All
product areas exhibited sales gains. Cigars, pipe tobacco, lighters, and
snuff show the largest increases.
Operating income grew by 18 percent to 491 MSEK, with gains primarily
from cigars, matches, pipe tobacco, and lighters. Snuff margins have
been impacted by increased costs due to product development and planned
launches of new products during the year.
Net financial expenses increased to -46 MSEK (-15) mainly due to the
redemption program, repurchase of shares, and the acquisitions of
General Cigar and pipe tobacco business in South Africa.
Earnings per share during the first quarter increased to 0.80 SEK
(0.59).
An increased annual dividend is proposed, to 1.35 SEK per share (1.22).
In addition a prolonging of the mandate to repurchase up to 10 percent
of the total amount of outstanding shares is proposed. The share capital
is proposed to be reduced through cancellation of 15 million repurchased
shares.
Summary of Consolidated Income Statement
January - March
MSEK 2001 2000
Sales 3,069 2,394
Operating income 491 415
Net income for the period 297 262
Sales by product area
12 months
January - Change ended Full Change
March year
MSEK 2001 2000 % March 31, 2000 %
2001
Snuff 528 459 15 2,140 2,071 3
Chewing Tobacco 314 282 11 1,259 1,227 3
Cigars 750 405 85 3,035 2,690 13
Pipe Tobacco & 205 173 18 794 762 4
Accessories
Matches 425 391 9 1,746 1,712 2
Lighters 220 175 26 765 720 6
Other operations 627 509 2,469 2,351
Total 3,069 2,394 28 12,208 11,533 6
Operating income by product area
12 months
January - Change ended Full Change
March year
MSEK 2001 2000 % March 31, 2000 %
2001
Snuff 214 209 2 959 954 1
Chewing Tobacco 89 89 0 331 331 0
Cigars 101 52 94 396 347 14
Pipe Tobacco & 59 49 20 223 213 5
Accessories
Matches 44 25 76 109 90 21
Lighters 25 16 56 83 74 12
Other operations (41) (25) (139) (123)
Total 491 415 18 1,962 1,886 4
Smokeless Tobacco (Snuff and Chewing Tobacco)
Snuff
Swedish Match is the only global snuff manufacturer, and has leading
positions in the Nordic Market and South Africa. In the United States
the company has the largest share of the fast growing value price
segment. Major brands include General, Catch and Ettan in Sweden, Timber
Wolf in the US, and Taxi in South Africa. Sales in the first three
months increased 15 percent, to 528 MSEK (459). Volume in the US
increased almost 8 percent during the first quarter and the market share
was approximately 8 percent. Volume in the Nordic market increased 4
percent.
Operating income increased slightly versus the first quarter last year,
to 214 MSEK (209), despite significant increases in product development
costs and costs relating to upcoming product launches.
In May the new premium snuff Sequoia will be launched in the US. After
the end of the period the new brand, Click, has been launched in Bombay,
India.
Chewing Tobacco
Chewing tobacco is sold primarily in the North American market. Major
brands include Red Man and Southern Pride. Swedish Match is the leading
producer of chewing tobacco in the US. Sales in the first three months
amounted to 314 MSEK (282), an increase of 11 percent, mainly due to a
stronger US dollar.
Operating income in the first three months was 89 MSEK (89).
The chewing tobacco market in the US has declined at an annual rate of
approximately 4 percent over the past several years. Swedish Match share
of market has improved since the same period last year and amounts to
slightly more than 42 percent.
Brown Tobacco (Cigars and Pipe Tobacco)
Cigars
Swedish Match is one of the world's largest manufacturers of cigars and
cigarillos, and ranks number two in terms of sales value. Its largest
markets are North America and Western Europe, where about 75 percent of
the world cigar market exists. The company markets its broad portfolio
of brands worldwide, with both premium and mass market cigars. Major
brands include Macanudo, Garcia Y Vega, La Gloria Cubana, La Paz, Justus
van Maurik, and Wings.
Sales in the first three months amounted to 750 MSEK (405), an increase
of 85 percent over the same period last year. The increase is primarily
attributable to recent acquisitions in North America. The cigar market
grew in both North America and Western Europe, with the strongest gains
coming in the small cigar segment for mass market cigars in the US.
Operating income for cigars grew by 94 percent to 101 MSEK (52) in the
first quarter.
Pipe Tobacco and Accessories
Swedish Match is the third largest manufacturer of pipe tobacco in the
world, and its products are marketed worldwide. Major brands include
Borkum Riff, Boxer, and Half and Half. The main markets for pipe tobacco
are in North America, North Europe and Western Europe. The company also
has a significant presence in South Africa.
Sales for the three-month period increased to 205 MSEK (173), mainly due
to consolidation for two months of the recently acquired South African
business acquired from British American Tobacco. Operating income
increased to 59 MSEK (49).
Lights (Matches and Lighters)
Matches
Swedish Match has the number one worldwide share position. Brands are
mostly local, and very strong in their home countries. Major brands
include Swan, Three Stars, and Redheads. Sales for the first three
months grew 9 percent versus same period last year, to 425 MSEK (391).
Operating income grew by 76 percent to 44 MSEK (25). Operating margin
increased to 10.4 percent (6.4) due to improved margins on certain
markets and positive effects due to ongoing restructuring program.
Lighters
Swedish Match is the third largest lighter manufacturer in the world,
and its main brand is Cricket. Sales in the first three months grew 26
percent, to 220 MSEK (175). Operating income grew by 56 percent, to 25
MSEK (16) and operating margin was 11.4 percent.
Other Operations
Other operations include, among other things, the distribution of
tobacco products on the Swedish market, sales of advertising products,
as well as corporate overheads and expenses for business development.
Expenses for business development have increased versus same period last
year.
For the first quarter, net expenses grew to -41 MSEK (-25).
Net financial expense
Net financial expense in the first quarter amounted to -46 MSEK (-15).
Net interest expense amounted to -67 MSEK (-10). Other financial items,
net, amounted to 21 MSEK (-5).
Taxes
Taxes for the first quarter were 143 MSEK (139) corresponding to a 32%
tax rate.
Acquisitions
In January a small advertising product company in Belgium was acquired.
On February 1st the final agreement with British American Tobacco
concerning acquisition of its pipe tobacco business in South Africa was
concluded. The acquisition includes production facilities, stock and
brands. The annual sales amounts to approximately 200 MSEK.
A final agreement has also been concluded with the previous owner of
Leonard Dingler in South Africa regarding the earn-out on the purchase
price.
Investments
The Group's direct investments in tangible fixed assets amounted to 132
MSEK (53).
Total depreciation and amortization amounted to 156 MSEK (121), of which
depreciation on tangible assets amounted to 76 MSEK (65) and
amortization of intangibles amounted to 80 MSEK (56).
Financing and liquidity
At the end of the period, the Group had a net debt of 3,859 MSEK, as
compared with 2,739 MSEK at December 31, 2000.
Cash and bank balances, including short term investments, amounted to
1,933 MSEK at the end of the period, compared with 2,960 MSEK at the
beginning of the year. The liquid funds are primarily invested in short-
term marketable interest-bearing securities.
Tobacco tax
During the past 12 months, total tobacco tax and value-added tax on
tobacco tax paid by Swedish Match in Sweden amounted to 9,739 MSEK
(9,075).
Average number of Group employees
The average number of employees in the Group during the 12 month period
ending March 31 was 14,480, compared with 13,672 for the full year 2000.
Redemption of shares and share repurchase program
After the reduction of share capital due to cancellation of 17,350,210
shares, according to the resolution by the Extra Meeting of Shareholders
in October 2000, was registered in March 2001, the company's share
capital amounts to 927.8 MSEK. The share capital is spread over
386,596,181 shares with a par value of 2.40 SEK. Through repurchase
Swedish Match holds 23,674,377 in its treasury which means the number of
outstanding shares amounts to 362,921,804.
At the General Meeting of Shareholders on April 24th 2001 the Board of
Directors suggests reduction of share capital with 36 MSEK through
cancellation of 15,000,000 shares with transfer to unrestricted reserve.
The Board of Directors also proposes renewed authorization to acquire a
maximum of 10 percent of all shares in the company. After reduction of
share capital and if the mandate to repurchase will be fully utilized
the number of outstanding shares in the company will be, net after
repurchase, 334.4 million shares.
Accountings principles
This interim report has been prepared in accordance with the
recommendation RR 20 Interim Reports from the Swedish Financial
Accounting Standards Council.
Starting with this interim report Swedish Match applies the Swedish
Financial Accounting Standards Council's new recommendation RR 9 Income
taxes. The financial data for 2000 has been restated according to the
new principles.
Additional information
This report has not been reviewed by the Company's auditors.
The interim report for the first six months of 2001 will be released
July 24, 2001.
Stockholm, April 24, 2001
Lennart Sundén
President and Chief Executive Officer
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About Us

Swedish Match develops, manufactures, and sells quality products with market-leading brands in the product segments Snus and moist snuff, Other tobacco products, and Lights. Production is located in seven countries, with sales concentrated in Scandinavia and the US. The Swedish Match share is listed on Nasdaq Stockholm (SWMA).
Swedish Match’s vision is a world without cigarettes. Some of its well-known brands include: General, Longhorn, White Owl, Red Man, Fiat Lux, and Cricket.